The Importance Of Financial Statements And Different Groups Essay
Introduction This report will outline the various reasons why different groups are interested in the financial statements of a company. Financial statements are formal documents that show the financial activities of a business, person or entity. When a company makes a decision, they look at the benefits and drawbacks before reaching a conclusion. It is important to assess the company’s financial position in order to make sound decisions because it may be the difference between making a profit and suffering a loss when working with the business. This is why various groups such as management, creditors, investors, unions, governments and politicians are interested in a company’s financial statements.
Management are people who manage or own the business. They are the people that use financial statements to see if their business is earning a profit or loss. They use income statements (refer to figure 1 on p. iii) to analyze the net income or net loss. Income statements are helpful for management to create goals and strategies for the company, and to make important decisions. Furthermore, they use financial statements to compare what year or month they made a profit or loss. By comparing financial statements, management can see where their strengths and weaknesses are and can quickly work on their shortcomings. Another type of financial statement that is useful to management is the cash…